NBC made a terrible financial investment in Olympics broadcasting rights and would have gotten away with it if it weren’t for those meddling millennials.
As you’re no doubt aware by now, mostly because you weren’t watching, the ratings for the 2016 Rio Olympics on NBC were down from the previous incarnation. The heavily tape-delayed broadcasts and curious coverage choices led to a 17 percent overall drop in ratings and 25 percent drop in ratings among the 18-49 age demographic.
It’s left a lot of people wondering what NBC can do to fix its coverage and increase ratings next time around. Perhaps it’s important, however, to remember how NBC got in this mess in the first place.
Back in 2011, the U.S. media rights to the 2014 and 2016 Games were up for grabs (although companies were allowed to bid on more than the two Olympics that were up for bid). Unlike other bidding processes which don’t play out on a firm schedule, interested networks travel to the IOC, make presentations, and then submit a bid into a box. The bids are later reviewed, with a decision coming long after being submitted.
Going into this bidding in 2011, there was a strong belief that NBC wouldn’t renew its bid for the Olympics. Both Fox and ESPN had brought big contingents to make their pitch to the IOC, and industry insiders in the lead-up to the bidding often tabbed NBC (now under new ownership in Comcast and with Dick Ebersol recently removed) as an underdog to retain the Olympics. But it was all smokescreen.
Fox submitted a bid that was below the benchmarks the IOC was expecting, while ESPN only bid on two Olympics instead of the four available. Even if neither were serious about winning the bids, their offers had the intended effect. Already stinging from losing out on Pac-12 rights (which they lost to a joint bid from ESPN and Fox), NBC ended up bidding $4.38 billion, $1 billion more than Fox’s total bid. That’s a staggering overestimation and it was just the kind of domino the ESPN-Fox partnership needed.
At the time, an ESPN executive said that they were comfortable with their bid because, by their estimation, a $1.4 billion bid for the 2014 and 2016 games would have netted them a “slight loss.” NBC had just committed nearly double that and then subsequently extended their deal with the IOC through 2032, a move that certainly raised a lot of eyebrows given the location of those Olympics, as well as the television and social media landscape beginning to evolve.
Unable to compete because they had committed so much money to the Olympics, NBC watched as this “marriage of convenience” between ESPN and Fox snatched up Big East and AAC media rights, agreed to share Big 12 rights, and the aforementioned Pac-12 rights. NBC did outbid the duo for EPL rights, though their value doesn’t quite measure up in the United States.
Already a loss leader, the Olympics became an even tougher sell for NBC moving forward. However, because the network was now locked in to the properties at such a huge price, that seems to have forced its coverage to err on the side of being conservative. Knowing they’re probably going to lose money with each Games, how can NBC justify pumping resources into experimental broadcast formats, both on traditional television as well as online?
Instead, NBC seems to think it’s better off trying to maximize the value of thing like the opening ceremonies and primetime TV broadcasting via tape delay. Better to rely on the tricks you know and keep costs where they are than to take a risk on the tricks that have the potential to move you and your audience forward.
That’s how you end up blaming millennials. The audience that’s conditioned to consume sports and entertainment live, share it with their friends in the form of GIFs and memes, and watch more events on their laptop and phone than on the TV set can’t get the access they need. So they turn to one of the other thousands of entertainment options available to them these days, and NBC sits there wondering why they committed so much money to the Olympics.
NBC has three consecutive Asian Olympic Games coming up and they’ll need to figure out whether or not they’re willing to start taking risks in order to save face on this investment. They can keep the status quo, tape-delay everything, and try to force eyeballs to TVs. Or they can pay attention to the way audiences are consuming entertainment now (and will be in a few years) and play to that.
There’s a lot of committed money that might make it hard for the powers that be to pull those triggers. But as the Rio Olympics might have taught NBC, not changing could end up being catastrophic to its bottom line.